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Matt Smith

Matt Smith

Taking a voyage across the world of energy with ClipperData’s Director of Commodity Research. Follow on Twitter @ClipperData, @mattvsmith01

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Asian Crude Markets On Edge As OPEC Meets

The gloves are off in Vienna and OPEC members are trading verbal blows about what they will or won't do in relation to production cuts. Finally the main event arrives tomorrow (finally!), while we also get the added bonus of a weekly inventory report to pique our interest. But for now, hark, here are five things to consider in energy today:

1) Asia, which accounts for a third of global oil consumption, receives over three-quarters of its waterborne imports from OPEC members.

The cartel sends over 15 million barrels per day into Asia, over sixty percent of its exports, to the leading destinations of China, India, South Korea and Japan. As we discussed last week, only the U.S. breaks up this Asian group, coming in as the third leading recipient of OPEC crude at 3.2 million bpd.

Given that Asia is the leading destination of OPEC flows, it will likely feel the biggest impact to any production cut should it occur - with non-OPEC producers such as Russia watching avidly from the sidelines.

(Click to enlarge)

2) This article highlights how Iranian crude imports into South Korea have more than doubled through 2016 versus year-ago levels, and we can see this coming through in our ClipperData. South Korea is the third largest recipient of Iranian crude this year, behind China and India. As total Iranian exports continue to rise, so do South Korean receipts, now above 280,000 bpd so far this year.

(Click to enlarge)

3) Strength in crude exports to Asia is a common theme across Middle East producers. United Arab Emirates, which has exported approximately 2.7mn bpd this year, has sent over 90 percent of its exports to the region. Interestingly, it is Japan that is the leading recipient of UAE crude, with India and China lagging for once. Related: Undeterred By Trump Threats, Schlumberger Signs Deal With Iran

(Click to enlarge)

4) This is a nifty representation of something we have looked at before - oil demand growth expectations from the recent IEA World Energy Outlook. While demand from passenger vehicles barely increases - as a drop in passenger car demand of 600,000 bpd is offset by increasing demand from other vehicles such as motorbikes and buses - demand growth from aviation, trucks, trains and shipping is set to lead oil consumption higher. It is the petrochemical sector, however, which is set to see the most growth:

(Click to enlarge)

5) Finally, U.S. natural gas exports have ramped up strongly this year, even though the start of LNG exports have only modestly boosted this volume. Almost all of the export growth has come through from pipeline flows to Mexico; exports are up 25 percent on year-ago levels, averaging 3.6 Bcf/d this year.

In fact, according to Platts, November is set to be the first month that the U.S. is a net exporter of natural gas. It has exported an average of 7.4 Bcf/d, higher than the 7 Bcf/d imported. This situation is expected to continue in 2017, as both LNG exports and pipeline flows to Mexico continue to rise.

(Click to enlarge)

By Matt Smith

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